Real estate industry

A hazardous ruling: the Service denies deductibility of asbestos mitigation costs

Article Abstract:

IRS Technical Advice Memorandum (TAM) 9240004 on tax deductions for toxic cleanup and asbestos mitigation costs did not give clear guidance and in fact misapplied the case law in this area. The IRS ruled that toxic mitigation efforts to be a production activity requiring capitalization of costs under IRC 263A. In today's bad economy, industry ability to foot cleanup expenses may hinge on their deductibility, which public policy would also seem to favor. Congress should compromise by adding a short amortization period.

Economic performance: the deductibility of estimated future costs of real estate development

Article Abstract:

Revenue procedure 92-29 is helpful for real estate developers who wish to deduct estimates of future improvement costs from their basis when they sell property. For example, the statute of limitations waiver applies only to computation aspects of the procedure. Allocation methods include choices of equal basis, consent or a ten year horizon. Other less helpful methods remain with revenue procedure 75-25 or IRC section 461(h).

Deductibility of environmental cleanup costs: the debate continues

Article Abstract:

The IRS has issued technical advice memorandum 9315004 covering the capitalization and tax deduction of cleanup costs for environmental pollution. Costs must be assigned to related assets instead of deducted currently. This memorandum applies to contamination of a site by PCB chemicals, while an earlier ruling covered asbestos pollution. These two rulings provide initial guidelines which will be elaborated.